Coronavirus Business Interruption Loan Scheme Revamped

Following on from the article yesterday regarding the difficulties businesses were facing in getting any of the cash promised by the government, the BBC today reported the government's proposals to revamp the scheme.

It was confirmed by the Treasury that they had received more than 130,000 loan enquiries from firms but fewer than 1,000 had been approved.

Following accusations that lenders were taking advantage of the crisis, Chancellor Rishi Sunak has confirmed he will speak to banks regarding the provision of the government backed loans.

Business Secretary Alok Sharma has said that the changes made to the scheme are to make it easier for firms to access the loans.

The most notable changes are as follows:

> Small businesses were previously only able to apply for the scheme if they had been refused a loan on commercial terms; this requirement has been removed

> Banks will be banned from asking for personal guarantees for loans of less than £250,000

> Loans of up to £25m will be made available to firms with revenues between £45m and £500m

The revamp did not go as far as capping the interest charged by banks for the loans, allowing banks to still charge interest at whatever level they like, even when they are borrowing at close to zero percent. As noted yesterday, whilst the government will pay the interest on the loan for the first 12 months, if the loan is for a longer period, the business will need to ensure that any interest payments can be met. This may not be an attractive option with interest rates as high as 30%.

The new measures have been welcomed and are likely to allow more businesses to get the financial support they need. However, these are still loans and it will be up to each individual business as to whether they are viable, even on these revised terms.